Officials following the negotiations between the government and IMF to join Extended Credit Facility (ECF) said talks have moved on in positive direction and decision on it will be taken as soon as the two sides agree on the terms of reforms and financial discipline to be followed.[break]
“We are in close talks with the government of Nepal. If everything went well, the country will have the program from 2011 for the next three years,” the IMF´s new mission chief for Nepal John Nelmes too told Republica.
If approved, the IMF, under the program, will maintain a close surveillance of country´s financial discipline and support it to uphold financial stability.
This will mainly enable Nepal enjoy financial and technical assistance to expedite reforms, fight economic problems and boost donors´ and international investors´ confidence to extend budgetary support and investment.
The government and the IMF had begun dialogues on entering ECF - the newly designed soft loans facility - after the government in the last fiscal year placed formal expression of interest to join the program.
Top officials of Ministry of Finance and the Governor of Nepal Rastra Bank had met with the senior officials of the IMF to discuss issues to this connection last week, on the sideline of the annual meetings of the IMF and the World Bank.
During the meeting, they had re-apprised Nepal´s economic condition and the government´s willingness to enter the program to Chief of IMF´s Asia and Pacific Division Anoop Singh, among others.
Nelmes, who was also present on the occasion, said that the IMF board will take decision on Nepal´s case after the mission that he led to Kathmandu some two weeks ago submits its report.
Concerned officials preferred not to disclose the volume of assistance. But sources said Nepal could get an assistance of around 120 million US dollars for the next three years to steer the reforms, maintain international reserve and manage the balance of payment.
The IMF had recently pledged US$ 24 million to Nepal under its rapid credit facility. The support - one-time assistance - was pledged with an aim to fight the huge balance of payment deficit the country suffered in the last fiscal year.
“ECF, however, will be program and scheduled based assistance,” said the source. Under it, Nepal will need to reform its public financial management, do away with structural constraints like stringent labor law and anomaly in petroleum sector, and step up reforms of financial sector, among others.
If the country failed to adhere to such scheduled norms, IMF could terminate the program in the middle.
So far the IMF has expressed satisfaction over reforms Nepal did on public financial management. However, it has shown concerns over derailed reforms.
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